CPSE ETF may enter top 10 equity scheme club

A second exchange-traded fund (ETF) is likely to enter the club of top 10 equity schemes in the country. Because of two sizeable follow-on offers by the government in the Central Public Sector Enterprise (CPSE) ETF, the index could break into the league of biggest schemes in terms of asset size. The only ETF in the top 10 club is SBI ETF Nifty 50, which had assets of Rs 15,520 at the end of last month.

The CPSE ETF is an index of 10 state-run companies, including Coal India, ONGC and Oil India. The government has divested its holding in the basket of 10 companies as a part of its disinvestment programme.

On March 14, the government launched the third tranche of CPSE ETF worth Rs 2,500 crore. The offering was subscribed nearly four times. The units issued in the third tranche were listed on Tuesday. The CPSE ETF had assets under management (AUM) of Rs 7,432 crore as of February 28 and it is likely to have increased to Rs 9,900 crore following the third tranche.

The previous tranche worth Rs 6,000 crore was launched in January 2017. The first tranche worth Rs 3,000 crore was launched in March 2014. The CPSE ETF, originally managed by Goldman Sachs Asset Manager, was acquired by Reliance Mutual Fund in October 2015. The CPSE ETF is likely to become the top scheme of Reliance MF.

As of February 28, Reliance Equity Opportunities Fund, with assets of Rs 9,808 crore, was the biggest scheme of the fund house and the 10th biggest scheme overall, data provided by Value Research show. The scheme-wise AUM data are released on a monthly basis.

The net asset value of the CPSE ETF on Tuesday ended at Rs 27.78, up 0.64 per cent. Interestingly, the units of the CPSE ETF have appreciated 58 per cent in the past one year. In comparison, the benchmark BSE Sensex has gained 16 per cent. The success of the CPSE ETF has prompted the government to increasingly tap the ETF route for its divestment programme. The government is in the process of launching a new ETF, which will have a different set of underlying stocks. The Centre has appointed ICICI Prudential MF to manage the second CPSE ETF. According to reports, the government is also looking to divest its holdings in Axis Bank, ITC and Larsen & Toubro through an ETF. It isn’t sure whether these three companies will be part of the proposed second CPSE ETF.